Policyholders are being cautioned that they should learn about these changes to ensure that they are properly covered.
Officials in New Zealand are warning homeowners insurance policyholders that there are some major changes on the way, and that they will likely be placing the liability for correct valuations on the back of the property owners.
This announcement was from the Insurance Council of New Zealand, which is warning property owners to take necessary steps.
Homeowners insurance companies are preparing to introduce a new method of sum-insured calculation that would come up with the premiums for a policy, instead of basing it on the current formula, which is based on the number of square meters. It is believed that these changes will come into effect as early as the end of April 2013, or at the next policy renewal time for a property owner, depending on the individual insurer.
The changes will mean that homeowners insurance will cover the actual cost of a house rebuilding.
The chief of the Council, Tim Grafton, explained that the changes will mean that should a covered peril destroy a house, the home insurance policy will cover the actual cost of the rebuilding of that structure. He explained that it is now the property owner’s responsibility to tell the insurer the amount for which they would like the house to be covered. This will be the amount that will be applicable should the building be flooded or burn down, for instance.
Grafton said that “I think of it more like contents insurance, so you might insure the contents of you home for $80,000. This time you are going to be adding to that and saying well I’m going to insure the house for $450,000 or $500,000 or $1 million.”
Equally, homeowners insurance policyholders will also be responsible for updating their policies if they should complete renovations to their houses, in order to make sure that these changes will still be covered. Grafton advised that “Each year, if you’ve done a major renovation for your kitchen or bathroom or something like that, you need to recalibrate that to your sum insured.”